Macro Analysis /
Bulgaria

COVID-19 Info: March 2020

  • The government has limited tools to mitigate COVID-19 negative economic effect

  • The main immediate drag to the economy will be trade & transportation as well as export manufacturing

  • As an export-oriented economy, Bulgaria will be seriously affected by the slowdown in Germany and Italy

Nadejda Dafinkicheva
Nadejda Dafinkicheva

Financial Analyst and Investment Advisor

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First Financial Brokerage House
20 March 2020
COVID-19 effects on Bulgarian economy and largest public companies Covid-19 is here and it is spreading fast. Lockdown and turmoil it caused will have a substantial impact on people's life and on the economy. Being in a highly dynamic situation and by way far from the pandemic peak, commenting on any trends and potential scenarios has very low reliability. Certain effects on macro sector and capital market level, however, are clearly visible. Our insights are summarised below. The government has limited tools to mitigate COVID-19 negative economic effect. Even though Bulgaria has been running budget surplus (except last year due to one-offs) and debt is low, the virus is depleting tax revenue very fast, while the probability for hike in social expenses is high. In the same time Bulgaria would be able to benefit from EU funding for about BGN 1.5bn to fight COVID-19 effects. As an export-oriented economy Bulgaria is to be seriously affected by the economic slowdown in its main trading partners- Germany and Italy are #1 and #3 – implying serious volume decline and production prices deflation. The main immediate drag to the economy will be trade & transportation as well as export manufacturing, while financial sector and real estate will follow with couple of quarters lag. Higher spending on healthcare and increased social spending as well as agricultural sector should help GVA to lose “only” 5% Government spending is to offset drop in private consumption and investment. Export and import would dive almost simultaneously on trade restrictions, yet due to their structural and geographic differences export is to be worse affected and we expect significant expansion of trade deficit.